28th Jan 2008 07:00
Beale PLC28 January 2008 Monday 28 January 2008 PRELIMINARY RESULTS Beale PLC, the specialist department store operator, announces PreliminaryResults for the 53 weeks ended 3 November 2007 (comparative period : 52 weeks ended 28 October 2006). Key Points * Trading affected by worsening economic environment,compounded by the effect of poor weather during the late spring and early summer * Gross sales* for the year increased by 1.1% to £108.2 million (2006 : £107.0 million), including sales of £1.7 million generated from the 53rd week in the financial year * Revenue for the year was £59.1 million (2006 : £59.9 million) * Gross profit for the year of £32.2 million (2006 : £32.9 million) * Operating loss of £1.07 million compared to an operating profit of £0.47 million in the prior year * Further cost reductions achieved, but administrative costs affected by increases in rent, rates and energy costs, all costs over which the company has little control * Appointment of Tony Brown, previously retail director of British Home Stores, as Chief Executive with effect from 1 April 2008 Mike Killingley, Chairman, commented: "We are extremely cautious in our outlookfor the remainder of the year. Economic uncertainty, coupled with higher tax,mortgage interest and energy costs, make any significant improvement in ourunderlying profitability difficult to envisage before 2009 at the earliest. Weexpect to have another difficult year." Allan Allkins, Chief Executive, added: "With a marked downturn in consumerspending it has been a difficult year, with the economic environment andunseasonal weather significantly affecting our apparel sales. "Although we have experienced a difficult year I am pleased with the progressthat we have made in a number of areas, particularly the comprehensive review ofour cost and supply base and the improvements made to our product ranges. I amconfident that when the national economic difficulties that currently challengethe high street ease, we will be in a stronger position to return the businessto respectable profitability." For further information: Beale PLC Tavistock Communications Blue Oar Securities PLCAllan Allkins, Lulu Bridges Jerry Keen Chief Executive Polly Hutchinson Tel: 020 7448 4492 Ken Owst, Finance Director Tel: 020 7920 3150Tel: 01202 552022 * Gross sales include the full value of concession sales and VAT and provide a more realistic indication of customers' spending patterns than revenue. Chairman's Statement Results The Group incurred a loss in the 53 weeks ended 3 November 2007, primarily as aresult of the worsening economic environment, compounded by the effect of poorweather during the late spring and early summer. The operating loss was £1.07million, compared with an operating profit of £0.47 million in the previousyear. Gross sales, which include concession sales and VAT, increased by 1.1% to£108.2 million (2006: £107.0 million). The consolidated financial statements for the Group are compiled for tradingperiods to the Saturday closest to 31 October each year. Consequently thetrading period to 3 November 2007 was a 53 week period. The previous accountingperiod was 52 weeks to 28 October 2006. Revenue, which excludes the non-commission element of concession sales and VAT,was 1.2% lower than last year at £59.1 million (2006: £59.9 million). Afterinterest charges, the loss before tax was £1.39 million (2006: profit £0.32million). In October 2007 we closed our store in Ealing, which had experienced difficulttrading conditions since it was acquired in 2002. With the opening of the WhiteCity development next year and the anticipated impact on the profitability ofthe store, the board took the view that closure was the most appropriatecommercial option. Gross sales, including VAT and concessions for the period were 1.1% above theprevious year's at £108.2 million (2006: £107.0 million). The additional grosssales generated from the 53rd week were £1.7 million, though with increasedadministrative expense this resulted in a small marginal pre tax loss for theincremental week. It should also be remembered that the Group's stores tradingpattern varied from year to year. Walton was closed after twelve weeks tradingin the previous year. Horsham traded for the full year to 3 November 2007, yetonly opened ten weeks before the end of the previous financial year. Ealingtraded for fifty two weeks of the financial year including a close down salebefore finally closing to customers on 28 October 2007. The revenue for the Group at £59.1 million was 1.2% below the previous year(2006 : £59.9 million). This decline results from increased participation ofconcession sales which are excluded from the revenue calculation as per note 2of the financial statements. Gross profit for the year of £32.2 million (2006 :£32.9 million) was achieved at a margin of 54.4% (2006 : 54.9%), reduced due tothe increased concession sales participation and lower achieved marginsresulting from the Ealing closure sale. Administration expenses of £33.3 million (2006 : £32.4 million) were 2.6% aboveprevious year due to operating the Horsham store for the full year, incrementalcosts of the 53rd week's trading and higher rent, rates and energy costs.Considerable effort has been put into managing our controllable expensesincluding a staff pay freeze being imposed. As noted in the previous year's report, the Walton store generated £386,000 ofoperating profit in 2006. The closure of the Ealing store and the trading lossfor the year generated in total a store operating loss pre head office cost andfinancing of £321,000 (2006 : £246,000). The board considered that the adverseimpact on the Ealing store from the new retail centre of White City, anticipatedto open in 2008, would have been significant. Thus having been offered a leasesurrender premium of £375,000 it was practical to progress a cost effectiveexit. Costs relating to closure of £483,000 including fixed asset write offresulted in net closure costs of £108,000. However, the exercise generatedworking capital in excess of £1.0 million from the sale of stock. Margins during the year were slightly lower than in the previous year, partly asa result of the greater focus on concessions within our business, and partly asa result of a successful closing down sale at Ealing. Concessions, particularlyapparel, have continued to outperform own bought merchandise and we havedeliberately changed the balance between the two areas. The net cost of financing of £317,000 (2006 : £142,000) resulted from bankborrowings in the year being higher due to the financing of the Horsham store.Overall the loss before taxation is £1,391,000 (2006 : profit £324,000). In response to the deterioration in the trading environment, and its effect onthe Group's performance, we have further reduced our cost base by more than £1million in our budget for the current financial year. Trading update Like for like gross sales for the first 11 weeks of our new financial year, to19 January 2008, were 6.4% below those for the previous year. Dividend The adverse trading performance resulted in a loss per share of 4.75p (2006 :profit 0.19p per share). During the year a dividend of 1.1p per share was paid(2006 : 2.2p per share). No dividend is proposed. We shall need to see a sustainable improvement in ourtrading results before considering a return to paying dividends. Balance sheet and cash flow Group capital expenditure in the year was £1.0 million (2006 : £3.6 million),the majority being new system spend. Fixed asset write-off amounted to £174,000(2006 : £48,000) resulting from the closure of Ealing. Group inventories werereduced by 11.4% to £10.2 million (2006 : £11.6 million). Trade payablesincreased by 34.5% to £7.8 million (2006 : £5.8 million) primarily as a resultof increased concessional liability at year end due to the final trading monthbeing five weeks this year rather than four weeks as in the previous year. Groupnet assets at year end were £20.7 million (2006 : £20.9 million). Net asset pershare at year end was 100.7p (2006 : 101.9p). Taxation The tax credit for the year was £417,000 (2006 : charge £284,000). This is dueto the recovery of tax from previous years and a reduction in liability for thecurrent year for deferred tax provisioning. The deferred tax provision alsobeing reduced as a result of the UK corporation tax rate falling from 30% to28%. Treasury Treasury activities are governed by procedures and policies approved by theboard. The Group's policy is to take a conservative stance on treasury mattersand no speculative positions are taken in financial instruments. The treasuryfunction manages the Group's financial resources in the most appropriate andcost-effective manner, minimising the Group's exposure to risk arising frominterest rate and foreign exchange fluctuations. During the year the Group hascontinued to operate within its existing borrowing facilities of two five-yearfixed term loans of £5.0 million and £4.5 million, plus an overdraft facility of£0.5 million. The reduced capital expenditure and reduction in working capitalduring the year offsetting the losses incurred resulted in Group net debt beingreduced by £1.8 million to £5.1 million (2006 : £6.9 million). With thereduction in borrowings, year end gearing fell to 24.2% (2006 : 33.0%). Cost control Tight control of costs continues to be a key objective and, although like forlike directly controlled costs are below the previous year, there has been aninexorable rise in costs that are outside our control. It is imperative that ourcost control in the current year reflects the forecast difficulties in theeconomy, with the consequent effect on sales and margin growth. It is alsolikely that margins will be under further pressure from continued aggressivediscounting in the high street, which was also a feature of last year's retailenvironment. We have, therefore, carried out a comprehensive Group cost review,with the intention of significantly reducing our directly controllableexpenditure during the 2007/8 trading year. We will achieve this with minimumdisruption to our customer service. Accounting policies and standards This is the second year that Group accounts have been prepared usingInternational Financial Reporting Standards (IFRS). In the year no newaccounting standards have been adopted. Pensions The Group offers new employees the opportunity to join the Beale's definedcontribution pension scheme. The defined benefit pension scheme was closed tonew entrants in April 1997. The board also manages the Denners' pension schemewhich was closed to new members and future accrual when Denners Limited wasacquired by the Group in 1999. The Group's final salary pensions liability underIAS19 at year end was £2.3 million (2006 : £5.2 million) a reduction of £2.9million. Furthermore the assumptions used at this year end as advised by theGroup actuary are more prudent than those applied in earlier years. The nexttriennial valuation of the Beales Pension Scheme is based on the accounting dateof 3 November 2007 and a revised schedule of contributions must be agreed withthe trustees by early 2009. Trading We have continued to build upon the success of the individual store BusinessPlans, which are reviewed annually by the trading directors. They concentrateupon ensuring the assortment and price structure is right for each individualstore customer profile. This is different from store to store, although, ofcourse, there is commonality across many of the ranges. Concessions, particularly apparel, have continued to out-perform own boughtmerchandise in a number of areas, with the consequent effect on marginsachieved. This is particularly the case with fashion, which has generally had avery difficult year, given the unseasonal weather patterns throughout the year.We have reduced our selling square footage of own bought womenswear andintroduced eleven new concession partners across the Group, one of which will beexclusively for young fashion, which will offer a number of key brands and animproved stock profile. We believe this strategy has, and will continue, tooffer improved own bought assortments and more balanced ranges. Our own bought homewares range performed well, particularly China and Glass, inwhat was a difficult trading environment but unfortunately total homewares salesdisappointed, due to poor concession sales. During the year we started the installation of a new management accountingsystem in head office and stores using a specialist IT company. There have beenoccasions when it has not proceeded as effectively as we had hoped and, for aperiod, this disrupted our stock replenishment systems and we lost sales as aresult. I am, however, pleased to report that we shall achieve a satisfactorycompletion this financial year. As the high street competition intensifies so does our search for improvedmargins, particularly in the categories that are not so obviously seasonal. Wehave, of course, historically, sourced from the Far East, but always through oursuppliers. In order to maximise our margins we are now buying selectivecategories direct from the Far East, which will ensure improved ranges, valuefor the customers and higher margins. Our strategy for own bought merchandisewill concentrate upon: - Widening the merchandise ranging from the Far East - Maximising the benefit of our new operating systems to improve stock turn and reduce markdowns - Building upon the success of our exclusive label merchandise, Harbour View in womenswear and linens and McNeal in menswear - Reinforcing the success of the Group's cosmetics departments with the introduction of additional brands In addition to concession changes across the Group, we have made significantadditions to the Horsham store's assortment by expanding menswear, andintroducing a soft furnishing department and five new fashion concessions. Wealso introduced toys into the Bournemouth store in time for Christmas 2007 withgreat success. Principal risks and uncertainties All retailers face a very challenging and competitive trading environment. Thegreatest risk to our business continues to be a sustained economic downturn withthe consequent impact of increased discounting to drive sales, which has been amajor feature of the 2006/2007 trading year, and the loss of margin and profit.In an environment where achieving sales increase is a continued challenge, it isof paramount importance that cost saving targets are met. The Company managesthese risks by: - Balancing concession and own bought merchandise - Ensuring that challenging cost saving targets are achieved - Implementation of the Group Corporate Plan - Continued improvement in our product ranges, maximising margins from direct Far East sourcing - Full implementation of the recently introduced management accounting systems, which will ensure, inter alia, improved stock control and replenishment - Regular monitoring of strategic KPIs Environment We believe in working with and supporting the communities in which we operateand we are closely involved with the town centre and council management in manyof the towns in which we trade. We continue to seek ways to reduce productpackaging and bag usage in addition to increasing the recycling of cardboard,plastic and other waste. We intend to pay particular attention to reducing theenvironmental impact of the Group's carrier bags. We are also working with theCarbon Trust to review opportunities for greater energy efficiency in ourstores, service buildings and offices. Our staff The challenging retail environment places much greater pressure on all ourstaff, both in our stores and behind the scenes, than when economiccircumstances are more buoyant. On behalf of the board and shareholders I thankthem all for their continuing support. Board We were very sad to announce the death in December 2007 of our independentnon-executive director Alison Richards, after a long illness. We shall greatlymiss her incisive and vigorous contribution. We are in the process of recruitingher replacement. We announced last October that Tony Brown had been appointed as the Group's nextChief Executive. He will join us on 1 April 2008 and will replace Allan Allkins,who is retiring. I would like to thank Allan for his contribution to the Groupover the past 6 years, in what has become an increasingly difficult retailenvironment. We wish him well in his forthcoming retirement. I am delighted that Tony has decided to join Beales; he will bring a wealth ofvaluable retail and operational experience to the business. He has been retaildirector of British Home Stores since 2001, and is responsible for their storeoperations throughout the UK and Ireland. He was previously operations directorof Somerfield Stores and a regional managing director of Asda Stores. Outlook We are extremely cautious in our outlook for the remainder of the year. Economicuncertainty, coupled with higher tax, mortgage interest and energy costs, makesany significant improvement in our underlying performance difficult to envisagebefore 2009 at the earliest. We expect to have another difficult year. We have the reserves to enable us to sustain the business through this difficultperiod. In the meantime we continue to focus on tight management of our costbase and our working capital while improving the quality, range and presentationof merchandise. Although we have experienced a difficult year I am pleased with the progress wehave made in a number of areas, particularly the comprehensive review of thecost and supply base and the improvements made to our product ranges. I amconfident that when the national economic difficulties that currently challengethe high street ease, we shall be in a stronger position to return the businessto respectable profitability. Mike KillingleyChairman 28 January 2008 Consolidated Income StatementFor the 53 weeks ended 3 November 2007 53 weeks to 52 weeks to 3 November 28 October 2007 2006 Notes £000 £000--------------------------------------------------------------------------------Gross sales* 2 108,171 107,018--------------------------------------------------------------------------------Revenue - continuing operations 2 59,132 59,864Cost of sales (26,933) (26,964)--------------------------------------------------------------------------------Gross profit 32,199 32,900Administrative expenses (33,273) (32,434)--------------------------------------------------------------------------------Operating (loss)/profit - continuing operations (1,074) 466Interest payable (331) (171)Interest receivable 14 29--------------------------------------------------------------------------------(Loss)/profit on ordinary activities before tax (1,391) 324Tax 417 (284)--------------------------------------------------------------------------------(Loss)/profit for the period from continuing (974) 40operations attributable to equity members -------------------------------------------------------------------------------- --------------------------------------------------------------------------------Basic and diluted (loss)/earnings per share 3 (4.75p) 0.19pDividend paid per share 4 1.1p 2.2p-------------------------------------------------------------------------------- * Gross sales reflect revenue from concession sales and VAT from continued operations. Consolidated Balance SheetAs at 3 November 2007 3 November 28 October 2007 2006 £000 £000--------------------------------------------------------------------------------Non-current assets Goodwill 892 892Property, plant and equipment 28,986 30,698Financial assets 16 17Deferred tax asset - 1,308-------------------------------------------------------------------------------- 29,894 32,915Current assets Inventories 10,238 11,560Trade and other receivables 5,962 5,793Tax asset 43 126Cash and cash equivalents 91 119-------------------------------------------------------------------------------- 16,334 17,598Total assets 46,228 50,513--------------------------------------------------------------------------------Current liabilities Trade and other payables (12,162) (10,475)Tax liabilities (15) -Bank overdrafts and loans (4,957) (516)-------------------------------------------------------------------------------- (17,134) (10,991) Net current (liabilities)/assets (800) 6,607Non-current liabilities Bank loan (250) (6,500)Retirement benefit obligations (2,304) (5,199)Deferred tax liabilities (4,886) (5,937)Obligations under finance leases (976) (974)-------------------------------------------------------------------------------- (8,416) (18,610)Total liabilities (25,550) (29,601)--------------------------------------------------------------------------------Net assets 20,678 20,912--------------------------------------------------------------------------------Equity Share capital 1,026 1,026Share premium account 440 440Revaluation reserve 9,152 8,981Capital redemption reserve 242 242ESOP reserve (48) (56)Retained earnings 9,866 10,279--------------------------------------------------------------------------------Total equity 20,678 20,912-------------------------------------------------------------------------------- Consolidated Statement of Recognised Income and Expense 53 weeks to 52 weeks to 3 November 28 October 2007 2006 £000 £000--------------------------------------------------------------------------------Actuarial gain on pension scheme 1,579 799Tax on items taken directly to equity (869) (240)Impact of change in tax rate 256 ---------------------------------------------------------------------------------Net income recognised directly in equity 966 559(Loss)/profit for the period (974) 40--------------------------------------------------------------------------------Total recognised income and expense for the period (8) 599-------------------------------------------------------------------------------- Consolidated Reconciliation of Movements in Equity 53 weeks to 52 weeks to 3 November 28 October 2007 2006 £000 £000--------------------------------------------------------------------------------Opening equity 20,912 20,765Total recognised income and expense for the period (8) 599Dividends paid (226) (452)--------------------------------------------------------------------------------Total movements in equity for the period (234) 147 Closing equity 20,678 20,912-------------------------------------------------------------------------------- Consolidated Cash Flow StatementFor the 53 weeks ended 3 November 2007 53 weeks to 52 weeks to 3 November 28 October 2007 2006 Notes £000 £000--------------------------------------------------------------------------------Cash flows from operating activities before interest and tax 5 3,176 1,227Interest paid (332) (154)Interest received 14 29Tax received/(paid) 160 (251)--------------------------------------------------------------------------------Net cash flow from operating activities 3,018 851-------------------------------------------------------------------------------- Cash flows from investing activities Purchase of property, plant and equipment (1,014) (3,640)Proceeds from sale of financial assets 1 -Proceeds from sale of property, plant and equipment - 8--------------------------------------------------------------------------------Net cash used in investing activities (1,013) (3,632)-------------------------------------------------------------------------------- Cash flows from financing activities Dividends paid (226) (452)(Repayment of)/increase in loans (1,750) 2,500Net proceeds from obligations under finance leases 2 2--------------------------------------------------------------------------------Net cash (used in)/generated from financing activities (1,974) 2,050--------------------------------------------------------------------------------Net increase/(decrease) in cash and cash equivalents in the period 31 (731)--------------------------------------------------------------------------------Cash and cash equivalents (including overdrafts) at beginning of period (397) 334--------------------------------------------------------------------------------Cash and cash equivalents (including overdrafts) at end of period (366) (397)-------------------------------------------------------------------------------- NOTES 1 Nature of financial information The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 3 November 2007 or 28 October 2006. The financial information for 2007 and 2006 is derived from the statutory accounts for those years. The statutory accounts for 2006 have been delivered to the Registrar of Companies. The statutory accounts for 2007 will be delivered to the Registrar of Companies following the Company's annual general meeting. The Group auditors, Deloitte & Touche LLP, have reported on the 2006 and 2007 accounts, their reports were unqualified and did not contain a statement under 237(2) or (3) of the Companies Act 1985. The preliminary announcement has been prepared on the basis of the accounting policies as stated in the financial statements for the 53 week period ended 3 November 2007. While the information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS on 15 February 2008. 2 Revenue The entire Group's revenue is derived from retail sales made in the UK. Revenueexcludes the non-commission element of sales made by concession outlets. 53 weeks to 52 weeks to 3 November 28 October 2007 2006 £000 £000--------------------------------------------------------------------------------Gross sales 108,171 107,018VAT (15,953) (15,214)--------------------------------------------------------------------------------Gross sales (exc. VAT) 92,218 91,804 Agency sales less commission (33,086) (31,940)--------------------------------------------------------------------------------Revenue 59,132 59,864-------------------------------------------------------------------------------- Analysis of gross sales (excluding VAT) and revenue: -------------------------------------------------------------------------------- Gross sales Revenue Gross sales Revenue £000 £000 £000 £000--------------------------------------------------------------------------------Own bought sales 48,702 48,702 49,403 49,403Concession sales 42,966 9,880 41,720 9,780Interest on customer accounts 550 550 681 681-------------------------------------------------------------------------------- 92,218 59,132 91,804 59,864-------------------------------------------------------------------------------- 3 (Loss)/earnings per share 53 weeks to 52 weeks to 3 November 28 October 2007 2006--------------------------------------------------------------------------------Weighted average number of shares in issue 20,524,797 20,524,797Dilution - option schemes - ---------------------------------------------------------------------------------Diluted weighted average number of shares in issue 20,524,797 20,524,797-------------------------------------------------------------------------------- £000 £000(Loss)/earnings for basic and diluted earnings per share (974) 40 Pence pence--------------------------------------------------------------------------------Basic (loss)/earnings per share (4.75) 0.19Diluted (loss)/earnings per share (4.75) 0.19-------------------------------------------------------------------------------- 4 Dividends 53 weeks to 52 weeks to 3 November 28 October 2007 2006 £000 £000--------------------------------------------------------------------------------Amounts recognised as distributions to equity holders in the period Final dividend for 52 weeks ended 28 October 2006 of 1.1p per share 226 226 (2006: final dividend for 52 weeks ended 29 October 2005 of 1.1p per share). Interim dividend for 53 weeks ended 3 November 2007 of 1.1p per share - 226 (2006: interim dividend for 52 weeks ended 28 October 2006 of 1.1p per share)-------------------------------------------------------------------------------- 226 452--------------------------------------------------------------------------------The proposed final dividend for 53 weeks ended 3 November 2007 is nil (2006: 1.1p) per share - 226-------------------------------------------------------------------------------- 5 Reconciliation of operating profit to net cash flow from operating activities 53 weeks to 52 weeks to 3 November 28 October 2007 2006 £000 £000--------------------------------------------------------------------------------Operating (loss)/profit (1,074) 466 Adjustments for: Cash disbursements of pension obligations (net of charge (1,316) (1,135)included within the income statement) Depreciation 2,552 2,566Impairment of goodwill - 197Loss on fixed asset disposal 174 48Decrease/(increase) in inventories 1,322 (805)(Increase)/decrease in trade and other receivables (169) 477Increase/(decrease) in trade and other payables 1,687 (587)--------------------------------------------------------------------------------Cash generated from operations 3,176 1,227-------------------------------------------------------------------------------- 6 Analysis of net debt 53 weeks to 28 October 3 November 2006 Cash flow 2007 £000 £000 £000--------------------------------------------------------------------------------Cash at bank and in hand 119 (28) 91 Overdraft (516) 59 (457)-------------------------------------------------------------------------------- (397) 31 (366) Debt due within one year - (4,500) (4,500) Debt due after one year (6,500) 6,250 (250)-------------------------------------------------------------------------------- (6,897) 1,781 (5,116)--------------------------------------------------------------------------------Finance lease* (974) (2) (976)-------------------------------------------------------------------------------- * Finance lease relates to the long leasehold 7 Report and Accounts Copies of the Company's Annual Report and Accounts will be sent to shareholdersin due course. Further copies may be obtained from the company secretary, BealePLC, The Granville Chambers, 21 Richmond Hill, Bournemouth BH2 6BJ. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BAE.L